Pro-union campaign in crisis after minister admits currency union ban was a bluff

THE anti-independence campaign was last night in disarray as a vicious blame game broke out over a hugely damaging claim by a coalition minister that Scotland could keep the pound after a Yes vote in the referendum.

Furious Labour and LibDem sources pointed the finger at the Conservatives for a report yesterday which said Scotland could share the pound with the rest of the UK after a Yes vote, despite the Coalition repeatedly saying it was impossible. Number 10 is now to set up a probe to indentify the rogue minister.

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The story forced Chancellor George Osborne and Danny Alexander, the LibDem Chief Secretary to the Treasury, to issue a statement insisting a currency union would not happen. "Any suggestion to the contrary is wrong," they said.

And Scottish Secretary Alistair Carmichael yesterday added to the sense of confusion by saying ministers could yet overrule official advice against a currency union for "political reasons", though he "didn't see it happening".

Any appearance of unity in the Better Together camp was undermined yesterday by Labour and the LibDems blaming the Tories for the story.

An anonymous Coalition minister was quoted saying that "of course" Scotland would have a formal currency union, perhaps in return for allowing the Trident nuclear deterrent to remain at Faslane.

The quotes flatly contradicted statements by Chancellor George Osborne and his Labour and LibDem counterparts who have all ruled out the SNP's plan for a formal currency union.

The refusal was seen by the pro-Union parties as a "gamechanger" in the referendum, as it undermined Alex Salmond's claim that Scotland would keep the pound rather than undergo the turmoil of creating a new currency.

The story, coming amid polls showing a narrowing of the No camp's lead, appeared to demolish the pro-Union position and back up Salmond's claim that Osborne had been bluffing all along.

The minister was quoted saying: "There would be a highly-complex set of negotiations after a yes vote with many moving pieces. The UK wants to keep Trident nuclear weapons at Faslane and the Scottish government wants a currency union - you can see the outlines of a deal.

"Saying no to a currency union is obviously a vital part of the no campaign. But everything would change in the negotiations if there were a yes vote."

The story also quoted a Treasury source claiming Better Together chair Alistair Darling and Downing Street's Scotland adviser Andrew Dunlop had pushed the Treasury into a flat refusal on a currency union to help the No campaign.

The Treasury's previous line had been that currency union was "very unlikely".

If a former Labour chancellor were proven to have helped shape policy under a Tory chancellor it could cause huge resentment among Tory MPs, many of whom blame Darling for the UK's economic problems.

At the Scottish LibDem conference in Aberdeen yesterday senior party figures admitted they wanted to strangle whoever was responsible, and threw out a number of possible Tory suspects, including ministers in the Cabinet Office, Department for Work and Pensions, Attorney General's office, and Ministry of Defence.

A senior Labour source said a "stupid b******" was to blame. "This was someone thinking they knew more about things than they did. We think it was a senior Tory, but not someone directly involved with the Better Together campaign."

Labour peer Lord George Foulkes added: "I think it was a Tory, but not one with any real insight. It was damn silly, daft. But people are only going on about it at the margins."

A Better Together source said the story was "a monumental pain in the arse" for the No campaign.

"They can't help themselves. They're completely off their rocker some of these people. It's bound to be a Tory. It's a massive pain for us, but we have to use it to keep currency at the front of the debate."

Carmichael's interjection yesterday referred to official advice against a currency union. Treasury mandarin Sir Nicholas Macpherson has told ministers the SNP's plan would be unstable and damage both the UK and Scotland.

At a media briefing in Aberdeen, Carmichael said: "If a Government minister is going to overrule the advice that he is given - which of course we are open to doing - then you have to do it for some political reason.

"The advice will not change, so the outcome will not change. The outcome only could change if there were a political decision taken to overrule the independent advice ... on one of the most central planks of government economic policy. That's why you know it's not going to happen."

Deputy SNP leader Nicola Sturgeon said: "Westminster's words on currency have now been exposed as the bluff and bluster that we always said they were. The result is a deeply damaged No campaign that is riven by splits and which will now find it impossible to recover.

"The revelation from a Treasury source that everything it has been saying on a currency union has been dictated by Alistair Darling is an extraordinary one and is deeply damaging to the credibility of the Treasury. What has been exposed is the deep cynicism and negativity at the heart of the No campaign - a campaign which is clearly badly rattled by narrowing polls and which will never be able to mount a truly positive campaign, because negativity is in its DNA."

Darling said: "A currency union would not be good for Scotland or the rest of the UK. That's why it wouldn't happen, no matter what anonymous quotes people read. The Prime Minister, the Chancellor, the shadow Chancellor, the Chief Secretary to the Treasury and the Permanent Secretary of the Treasury have all ruled it out."

l Further disarray in the No camp is also sown today in an interview with Carmichael in which he warns the No campaign could be in danger of losing the referendum because of complacency. "The danger is that by the time they [No campaigners] realise it could happen, it could be too late," he said. "Everybody needs to know that this is a serious contest, and one which it is not impossible that the nationalists could win."

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